BOE TAKES CENTRE STAGE ON THURSDAY
Thursday is expected to be a big day for currency traders, as the Bank of England (BOE) prepares to lift interest rates for only the second time since the financial crisis. Interestingly, the last time the BOE voted to hike rates was in November, more than a year after it slashed them to new record lows in response to Brexit.
The European session begins in earnest at 05:45 GMT with a report on Swiss consumer sentiment. Switzerland’s State Secretariat for Economic Affairs (SECO) is expected to show no change in the consumer climate index over the previous three months.
Over the next several hours, reports on Spanish unemployment, Swiss retail sales, and British construction PMI will make their way through the financial markets.
At 09:00 GMT, the European Commission’s statistical agency will release the latest figures on producer inflation. The Eurozone producer price index (PPI) is forecast to rise 0.3% in June, which translates into a year-over-year gain of 3.5%.
The BOE’s monetary policy announcement is due for release at 11:00 GMT. The Bank rate is widely expected to rise to 0.75% from 0.5%. According to a median estimate of economists, seven out of nine policymakers will vote in favour of a hike. The asset purchase facility will likely hold at £435 billion.
Bank of England Governor Mark Carney is scheduled to deliver a speech about 30 minutes after the official policy statement is released.
Shifting gears to North America, the US Department of Labor will issue its weekly jobless claims report at 12:30 GMT. Initial jobless claims are forecast to rise by 3,000 to a seasonally adjusted 220,000 in the latest week.
Later in the session, the Department of Commerce will report on factory orders for the month of June. Factory orders likely rose 0.7% month-on-month.
Europe’s common currency slipped further below the 1.1700 US handle on Wednesday, as traders continued to favour the dollar. EUR/USD is clocking in at 1.1662 and is fast approaching last week’s swing low of 1.1632. A break below this level could generate additional downward pressure on the pair.
Cable has been trading sideways for the better part of a week in anticipation of the BOE rate announcement. At the time of writing, GBP/USD was trading at 1.3122, where it was little changed from the previous close. Immediate support is located at 1.3090. Resistance is likely found at 1.3150.
After a strong start to the week, the Australian dollar swung lower on Wednesday, with AUD/USD falling back toward the 0.7400 handle. The pair is currently trading just north of that pivotal area. From a technical point of view, the pair faces immediate resistance at 0.7440. A break above this level is needed to generate a sustained rally.